The No. 1 Reason to Like SWHC Stock

Smith & Wesson Holding Corp (NASDAQ:SWHC), the U.S. manufacturer of firearms, has sold $210.8 million worth of guns and related items in Q3 2015. Those sales left $31.4 million ($0.56 per share) in profits, against $8.1 million ($0.15 per share) a year earlier. Both results exceeded analysts’ expectations. SWHC stock is trading at all-time highs.

Yet, Smith & Wesson stock could easily set new records moving forward, too, as guidance also exceeded expectations. In the current quarter, the company has targeted between $210 and $215 million, versus the $195 million consensus, for earnings per share (EPS) between $0.51 and $0.53 (versus a $0.47 EPS consensus).

Smith & Wesson has surprised financial and political analysts alike. President Obama made several appeals for more gun controls, but demand for the gun maker’s products never surrendered. Even after President Obama’s impassioned speech last January, gun sales continued at a brisk pace.

Perhaps calls to increase gun control invite gun buyers to stores. They fear that the government wants to take away their guns, so they go out and buy more before anything happens. Ironically, gun control appeals have left SWHC stock stronger than ever, suggesting gun stocks could be a reliable place to park your savings and watch them grow.

Indeed, gun buyers in the United States must have paid attention during President Obama’s plea for more gun controls last January. The FBI said it performed more than 2.5 million gun background checks in January. (Source: “NICS Firearm background Checks,” FBI, last accessed March 4, 2016.) That is a record for January, meaning Americans are buying more, rather than fewer, guns. The more intense the pressure to enforce gun ownership restrictions becomes, the more people seem to rush to buy them.

Erich Pratt, who represents Gun Owners of America, said that Barack Obama deserves the prize for best weapons seller of the decade. (Source: “Gun production has doubled under Obama,” The Hill, July 23, 2015.)

The data is incontrovertible. Under President Obama, the production of firearms in the U.S. has increased 140%, from less than 4.5 million to more than 10.8 million units. Imports have also increased and in 2013, at 5.5 million units, they hit a 30-year record. (Source: Ibid.)

It is always easier to get a gun. In the U.S., there are 50,000 armories and specialized shows where you can buy a gun after verifying the buyer’s criminal and psychiatric history. Yet, gun ownership is expanding thanks also to different demographic and cultural patterns.

Also in terms of legislation, the news is encouraging for gun rights supporters. Most laws relating to gun ownership that have passed have actually softened the regulations, rather than tightening them, as reported by The New York Times in December 2013.

In the end, the more politicians push for gun laws, the more guns companies like Smith & Wesson stock sell—suggesting that, at least for the time being, gun stocks are an attractive bet.